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Thursday, August 27, 2015

‘Homeless generation’ if no action on property prices, warns house buyers group

Owning a house is a distant dream for most Malaysians nowadays. The National House Buyers Association says property prices are inflated beyond the reach of the majority of working adults, as revealed in a recent study. – The Malaysian Insider file pic, August 28, 2015.

Putrajaya has allowed house prices in Malaysia to become "seriously unaffordable", said a group representating Malaysian house buyers, who warned of a "homeless generation" in the future if nothing is done to stop property prices spiralling out of control.

The National House Buyers Association (HBA) said it has told Putrajaya before that property prices had become inflated beyond the reach of the majority of Malaysians, and that giving subsidies to low-income earners to buy homes was not the answer.

"HBA has been warning the government for many years that prices of property have risen beyond the reach of the majority of the people. And unless serious measures are taken by the government, an entire 'homeless generation' will emerge which will bring about various social problems.

"This (subsidies) could work but then again, the government has been providing subsidies and social housing for the poor for generations, but has that improved the lot? No," said HBA honorary secretary-general, Chang Kim Loong.

Chang told The Malaysian Insider that HBA was not surprised with the findings by Khazanah Research Institute (KRI), that Malaysia's average house prices are more than four times the median income of its population, making them "seriously unaffordable".

Kuala Lumpur has especially been labeled "severely unaffordable" with house prices 5.4 times higher than the median income in the capital city.

Terengganu is the most severely unaffordable of all the states, with median multiple affordability standing at 5.5.

Penang was also rated as severely unaffordable while Selangor, Malaysia's wealthiest state, has a median house price of RM300,000, putting it at the "moderately unaffordable" level.

The maximum median range for housing prices compared to median income should not be more than three times the median income, the KRI report stated.

Putrajaya's housing programmes including giving subsidies for Malaysians to own a home are not holistic solutions to Malaysia's housing woes. – The Malaysian Insider file pic, August 28, 2015.Chang said that as subsidies have not been a holistic solution, the government must move away from the mentality of "giving fish" to teaching people "how to fish", in other words, empowering the public.

"What is the root of the escalating prices of houses? I am no expert or economist but I believe it is greed - that of the developer, the authorities and every player in the housing industry," he said.

"It is impossible to police morality but we can control house prices. The escalation must be reasonable to the escalation in annual income of an individual."

The government, he suggested, could also control profit margins in the sale of property, noting that there were other industries where companies' profit margins were regulated.

"If the government places great control and regulation over the oil and gas industry in this country, why can't the same be done for the housing industry where the individual purchasers faces the highest risk both financially and emotionally compared to the other players?

"And this control as to the profit margin is not only imposed on the developers but should be cascaded downwards to all the sub-contractors, suppliers, vendors, and others," he added.

Chang said there was an urgent need to curb excessive speculation that has rapidly driven up property prices in the last few years, pointing out that the biggest determinant in costs was demand and supply.

"We need to eradicate excessive speculation that has driven up property prices. Where demand exceeds supply, prices will go up.

"When the prices of completed homes are driven up due to excessive speculation, developers will normally launch new projects at a premium to the current prices of completed homes. As such, the prices of new launches and completed homes are inter-linked. When the prices of one goes up, the other will follow suit," he added.

The government, he said, had to put in measures to slow down the rise of property prices due to excessive speculation and to build more affordable properties for low and middle-income earners.

The trend in property prices seemed to indicate that prices would continue to rise, beyond the reach of majority of people, with the future generation finding themselves locked out because they cannot afford these properties, he warned.

"Young adults are unable to afford a reasonable, suitable and liveable house that doesn’t require either taking out a back-breaking bank loan or moving out to a distant and bland housing estate that involves mind-numbing daily commutes.

"Young adults are slowly becoming a homeless generation. Mind you, they are the future economic drivers of the city.

"Hence, the government must take concrete and proactive measures to curb the unbridled escalation of house prices," Chang added.